"Wir sollten den Verbrenner nicht komplett abschreiben!" - Klaus Zellmer, CEO Skoda (173)

Thank you for the invitation, Luca. Stuttgart is my hometown. I grew up here, so I have gasoline in my blood. I used to have eight VW Beetles on the street, blocking all parking spaces because I was swapping parts and repairing them. I discovered my love for cars and started tinkering because I couldn't afford my dream cars, like a Porsche. So I started with Beetles, which are almost like Porsches in a way. It's great to be back in Stuttgart as a visitor from the Czech Republic. I'm looking forward to your questions.

I had two passions in my youth: sports and cars. Growing up in Stuttgart, cars meant either Mercedes or Porsche. I studied automotive business at the University of Nürtingen, then worked as a research assistant at the Institute for Automotive Industry. I was lucky to meet the then sales director of Porsche at an event, and he hired me as his assistant in 1997. I stayed at Porsche for 23 years.

First, Škoda is 130 years old next year. It has its own roots and identity and is very successful in the market. What excites me about Škoda is a similar attitude to cars as at Porsche: going the extra mile, being pragmatic and hands-on, always looking for improvement. Our role in the group is clear: we benefit from group platforms like MEB for our electric cars, but we put our own hat on them. Our Enyaq was the best-selling electric car in Germany in September. We are part of the Core brand group with VW, Seat/Cupra, and commercial vehicles. Our role is to expand the footprint of these brands without stepping on each other's toes. In Germany, VW is number one, we are number four, and in Europe we are number four as well. We complement each other well.

We also share the MQB platform. Škoda has a whole shelf of parts used in the group. For example, we had the development leadership for the Passat and Superb (project Beta Plus). Due to our cost advantages in the Czech Republic, we developed that package more cost-efficiently. We also have development leadership for remaining combustion engines, including further development for Euro 7. There are many smaller examples where we put our development competence at the service of the group.

I would say 'affordable' rather than 'cheap'. You're right that the image is that we follow VW. But the question is not who makes the first step, but how we complement each other in the market to achieve greater overall success. What makes us special is 'Simply Clever' – surprising features in our cars that delight customers. We have solid quality, outstanding design (the new 'Modern Solid' design language with the Elroq), and unique interior quality. Our colleagues in the Czech Republic deliver exceptional quality. Studies consistently rank us at the top. So the overall package of design, quality, and production makes us very successful.

It's a tradition to challenge each other, like siblings in a family. Not everything claimed is true. It is true that all brands pay allocations for development within the group. The development costs are paid by the brands, not just Škoda. It's not that something is developed and given to us for free. For example, the Passat and Superb: they are developed together, costs are allocated based on volume and other factors. We have to bear our share of the costs. So the idea that we get things for free and make green numbers is not correct.

We're getting into detailed business administration. Basically, you add up the costs of developing such products, and then they are allocated to the different products and brands. The allocation key is not always proportional; it also depends on volume and other factors. But it's always based on who causes the costs. So we don't get things for free; we have to bear our share.

Our most important market is Germany, even more important than the Czech Republic due to its size. We have 35-38% market share in the Czech Republic, but in absolute terms, Germany is number one. We are very successful in Europe, moving from 10th place in 2022 to 4th in 2023, and we hope to hold that. Our next big region is India. India has a low motorization rate (25-50 vehicles per 1000 people) and is growing economically. We are investing there and using India as a hub for ASEAN countries, like setting up CKD production in Vietnam. We are responsible for India within the group.

China worked well as long as we invested in the right products, but it has become increasingly competitive. The group has homework to do in China. It's probably the most competitive car market in the world, with 100-200 electric brands. Within the group, VW is taking the lead there. For Škoda, China is less important than for VW. We are focusing on building our portfolio and dealer network in India, together with VW. Our success or failure was never really tied to China because we operated through a joint venture and only received licensing fees. Our first-half results show an 8% return on sales, which is good for a volume brand. Škoda's business model is very healthy: we have low personnel costs, low overhead, low manufacturing and development costs, and factor cost advantages in the Czech Republic, including energy costs. We also have less bureaucracy, which allows us to work more freely.

That cannot be the goal. Job security in Germany means prosperity, jobs, and supporting families. We have excellently invested production facilities in Zwickau, Emden, Wolfsburg, Braunschweig – billions have been invested. We need to find ways to overcome the factor cost disadvantage in Germany and become more competitive. We cannot just look at the group; Chinese competitors are investing in Europe, and once they set up production in Central and Eastern Europe, they will have cost advantages. So we must work together with all market participants and the government to improve the cost and bureaucracy situation in Germany.

First, if VW suffers, all brands suffer. We are like an organism; we can only win or lose together. Our contribution to the group is not just expanding the footprint but also generating profits that can be invested in the future. I would never say it's good that others are worse off. We also have development and production leadership for other brands; for example, Cupra has the lead for the A0 electric vehicles (ID.2, Raval, and our Epiq). This distribution according to capacities and cost factors is a strength of the group.

The peculiarity of Škoda is that our production capacities have always been slightly less than market demand. We simply didn't have the space in our plants to accommodate a large project like those three vehicles without a huge investment. The conditions in Spain were ideal for that. They also have competitive factor costs and a supportive investment climate. As a company, you have to choose the best conditions to be competitive against Chinese, Korean, and European competitors. The beauty of the group is that we can place different hats on the same skateboard with large scale effects.

That was a lot, let me sort it out. First, innovation is not only battery electric vehicles. Second, Škoda builds what customers want, not what we think they should buy. Our portfolio planning is based on free choice of drive. Our current mix with the Enyaq, Enyaq Coupé, and the new Elroq (deliveries from Q1 next year) fits the demand in Europe, where EV share is still below 20%. We also serve the over 80% with mild hybrids, plug-in hybrids, diesel, and efficient combustion engines. There were competitions to exit combustion engines early, but we always said the consumer decides. Look at heat pumps – you can't force them. For innovation, the further development of combustion engines at Škoda is a big driver. I think we are not well advised to completely write off the combustion engine, even with the 2035 deadline in Europe. We need to consider what happens to the 200 million combustion vehicles in the EU fleet by 2035, and alternative fuels could be a topic.

We need to approach this holistically. We are responsible for combating climate change. My thought sketch: an electric vehicle with a range extender powered by bioethanol would be a great story—driving CO2 neutrally with a range far beyond today's typical combustion and battery electric vehicles. Why doesn't it exist in Europe? Because the Chinese are building it. It's a very Chinese approach. I can tell you why it doesn't exist: because in the CO2 reduction that we are legally required to achieve, it doesn't count. You have to focus on what counts, whether it actually fights climate change or not. We need technology openness, because that means individual competence areas seriously address new challenges and come up with solutions we might not have thought of four or five years ago.

Now back to Škoda. You said we don't have batteries. We build the battery systems for the entire group in Mladá Boleslav—for hybrids and for MEB. Not all, it's distributed, but the trays where the cells are installed, which must be done in a clean room, that's done at our plant.

Price plays a crucial role, as does the entire framework for electric vehicles. Take Norway: there, the price is right, the charging infrastructure is unmatched, and the average GDP per capita is twice that of Germany. In Norway, when you buy an EV, VAT is waived up to a certain price point—that's 25% savings. And the registration tax for combustion engines is ten times higher than for EVs. It's a price issue. On the other hand, I have many people in my circle who simply can't warm up to battery electric vehicles for various reasons. They are very emotional.

The future is electric. From a technical standpoint, there's nothing better than electric vehicles because the efficiency of an electric motor is nearly 100%, compared to the best combustion engines at 40-45%. But the future is only electric if everyone wants it. There are emotional reasons why people don't want it; technical reasons are very few. My favorite example is range anxiety. The Elroq offers over 560 km WLTP. You shouldn't have range anxiety. I drove from Prague here, 483 km. Of course I can do that with an electric car. I need a break anyway, then I plug it in. Technically, it's no longer an issue. There are still optimization needs for charging infrastructure. But people buy a car for the most unlikely use case. They buy a station wagon because two years ago they shoved an IKEA cabinet in the back. Or range: I catch myself thinking about winter trips with snowboards. It might get tight. It's not a purely rational topic. You have to accept that people choose their car primarily for emotional reasons. That's why rational arguments don't suffice.

That's always been the case. I've been doing this job for a bit more than ten years, and I've never read, seen, or heard a CEO interview where they say money doesn't matter. They always say we fight for every cent, every comma cent, every hair that's left lying around. That's the job. It's not new that we watch the money when developing expensive and cheap cars. No, it's not new. But achieving price and cost parity is a different level of battle. Earlier, the job was easier. We had more scale effects, more experience, more cost degression possibilities, higher purchasing volumes. We don't have that with battery electric vehicles to the same extent. Considering the time dimension, it's not surprising that it hasn't been achieved yet. That's why it's so difficult. You could say just give the cars away or sell them with a negative contribution margin, but that's not sustainable. The accusation is that if we wanted to, we could. But we turn every cent. We show that with the Elroq and Karoq. But it's only possible with the greatest pain and effort to push into these areas.

Let me address the e-Octavia right away. Basically, we started with the Enyaq, then the Enyaq Coupé, now the Elroq—a compact SUV the size of the Karoq. Next comes the Epic, a smaller urban SUV. Please don't groan about SUVs in cities. I personally have a thing with SUVs, but that's personal. Škoda wants to make an urban SUV. I understand. But a small, affordable car—I can get on board with that. That will be the most compact battery electric vehicle we can offer by 2026. The Elroq is at €33,000, the Epic will be around €25,000 give or take, and we're working on a vehicle around €20,000. That's the plan. Now to the e-Octavia: we had it in our portfolio for 2026, but for various reasons we're pushing it beyond 2026. That has to do with the BEV slowdown. You can't do everything at once. We need certain volumes per vehicle because development investments are enormous. They are divided by the number of vehicles sold. If there's no positive result, we have to postpone until the market is ready. The current Octavia is the market leader in almost all major European markets. We see no decline in demand, especially in the fleet market for customers who drive many kilometers. A combustion engine is still a very good choice as long as it stays within legal limits and is affordable. So we're giving ourselves more time.

No, because it's not just Germany where we see the BEV slowdown. We saw a huge hype that we all followed. And it's not our China that's happening there. We are still in the planning phase. Within a plan, to say I'm pushing the e-Octavia from 2026 to a bit later doesn't cost anything yet. So it's no big drama for us. The special challenge in the auto industry is that you have to make decisions three to four years in advance, not knowing exactly what will happen. Then you have to hold on. So for us, it's no trauma. We feel quite comfortable giving the Octavia EV a bit more time. Also, the MEB platform, due to its relatively high design, is better suited for SUVs than for flat vehicles. With the SSP, our next platform after MEB, we will have the opportunity to build flatter vehicles. That also takes time.

Let me start with software. It's a huge field. Why is software so important? Because we are entering the age of software-defined vehicles. That starts with the electronic architecture in the vehicle. For that, Cariad is responsible. I know it well. Greetings to them. The closer we get to applications that the customer sees, like an app or app store, the more it goes to the brands, because those are brand-defining and identity-forming offers. We can also incorporate 'Simply Clever' there. That's why I said it's a subjective opinion. At Škoda, we originally had several apps for using Škoda vehicles. We've now consolidated everything into one app. We are very performant. Our ratings are consistently above four stars. Since we launched the new app, it doesn't always work perfectly, but we are much better. It works better than the previous collection. I used to do many connectivity tests. So when we get close to the customer application, we are already very good. We have pay-to-fuel, pay-to-park directly from the car. For EVs, plug and charge. So it's not that we can't do software. We have caught up significantly. We just launched software 4.0 in MEB vehicles, and we receive a lot of praise, much less frustration and complaints. We are on the right track. The great thing about software is that the fall height is different than with hardware. In the group, the fall height is also different. You got a lot of criticism, rightly so. Everything that is less bad is not necessarily good. But I go where it hurts, both me and our company. Three weeks ago, we brought in power users of the Enyaq, like Matthias Speicher, who is very active on social media. We spent a whole weekend with real customers, not just surveys. They confirmed that we have not only improved but are now at a level where you feel comfortable in these vehicles, covering the essential use cases. It still needs to get better, like everything in life. Every iPhone needs to get better. So we are at a level where we are significantly better. At Škoda, we have different IT units that program only for Škoda. Pay-to-fuel, pay-to-park were programmed by these units. We also operate our own app store. In the area of user experience, we place great emphasis on digital UX. We have design reviews every Monday, often focusing on UX design—how to remove complexity and visual noise from screens to make them easier and more intuitive. We put a lot of effort into that and have become much better.

First, software is not all the same. We're mixing a lot of things. We're talking about apps, offers, electronic architecture. The scalability: the deeper you go into the vehicle, the more we scale. That's why Cariad exists—to have a vehicle architecture. The closer it gets to the brand's identity, the more brand-specific it must become. Otherwise, everything would be the same, and the brands would lose their function. That's the basic principle. For things like the online shop, we have a service provider, Diconium, based here in Stuttgart. They built the online shop for the volume brands, not just Škoda. So there are already group units that develop and scale such requirements once for all. But the closer we get to the customer in terms of identity and appearance, the more it must be assigned to the brand. That's how it's organized now.

You mentioned PowerCo. That's our in-house supplier for batteries, future cells and battery systems, to secure a certain share of our needs. It would make little sense to place such a function at Škoda—to say Škoda is responsible for all batteries, cell factories. Same with software. It makes little sense for Škoda to be tasked with building a store or software for all brands to bundle costs. I don't see the scaling effects there. The brands themselves have the task of adapting what is centrally developed, scaled, and provided. That's what we do. There are technical exceptions, like Moia, which is not assigned to a brand but is an entity for mobility as a service. So there are certain technical topics where it makes sense to have a unit that collects requirements, programs, and provides them for the brands to adapt. That's the rule, and I think it's sensible. For technical topics, it's different. We build combustion engines and battery systems for the group because we can do it with high quality. That's an example. We constantly offer Škoda's advantages in cost and competence to the group. I can't go deeper into that. But development work, like with the Passat and Superb, is also done at Škoda. Within the group, we always want to get the best performance under the best conditions, and Škoda will always offer itself.

I'm a big Yeti fan too, even before I came to Škoda. It's a car with a lot of character. Our new design language, 'Modern Solid,' as we presented with the Elroq and the Epic, and next year the Enyaq will also get it—that's a face in the crowd. The vehicle in its design, proportions, and dimensions already has a high unique selling point. Will there ever be something like the Yeti again? Let's see. I'm such a big fan. Maybe it would be a car for India. But we might get the chance to approach such a vehicle. That doesn't mean we'll do it, but we're always looking. There's nothing better than looking at Škoda's 130-year history and thinking, what can we bring to the market with strong roots, credibility, and maybe a bit of a head start in perception? Yeti would offer great potential. I find that very exciting.

Streaming service. Ferrari. Apple. City. Car. Front. Driver. (Laughs) You'd have to ask my wife if I'm a good passenger; she'd probably say no. Accept all. Motorcycling. Star Wars. Coffee. Steak. Night owl.